What remote workers need to consider, track, and plan. Be sure to join Matt for his free webinar on October 13th at 11am PT to talk through these considerations and more. You can register here.
This is the first of a multi-part blog series on the financial implications of working from home. We will dive more deeply into some of the specific aspects as the series progresses.
Welcome to sleeping at work, or working from home! Whether you like it or not, your home is now formally part of your work environment.
So… let’s see…you no longer have that stocked break room, that free or subsidized cafeteria, that fancy copier/printer, superfast WiFi. Yikes! What about printer paper? Toner cartridges? Free gym on campus?
So you ask yourself: “Did my effective compensation just go down a little (or a lot)?”
Well, depending on your employer, it just might have! Sure, you have no commute expense, but what new expenses are starting to accumulate?
Suddenly we find ourselves spending a bit here, a bit there, not noticing until the end of the month, that we’ve got a lot of “office” expense that was unplanned, and perhaps not recoverable!
Here we share three simple suggestions to get organized and manage your spend, to prepare for reimbursements, write-offs, and generally be more mindful about “the new costs” of working from home:
- #1 Understand your status
- #2 Discover your employer’s policies on reimbursement (if any)
- #3 Organize & segregate your spend
So let’s launch into these simple tactics to consider:
#1 Understand your status
The first thing to do is know where you stand, in terms of the way the IRS recognizes you as far as your employment standing. You’ll fall into one of two categories if you’re like most working people in the United States:
- Full time or part-time W2 employee
- Full or part-time contract employee (or contractor)
If you’re an employee (form W2), you’re going to have to be proactive and organized in terms of your spend and how you finesse reimbursement.
Unfortunately, the IRS eliminated what used to be called “unreimbursed business expenses” in the last tax bill. You also don’t qualify for the Home Office Deduction. That said, you will still have some options, which we’ll go over below.
If you’re a Contractor or Consultant (form 1099) most of the benefits historically available to you “as a small business” remain in place, including the incredibly valuable Schedule C. Plus you may be able to join your W2 status colleagues in requesting employer reimbursement for the at-home work expenses.
Take time to learn about the Home Office Deduction as well. All of the popular tax services have a way for you to figure it out. Basically, it is a percentage of your home’s space and expenses for a fully dedicated workspace, and a proportionate factor for the actual expense of maintaining that space. It’s not a lot, but it can help. Here is the IRS page to get you started.
Note: you should always consult a tax expert about these items.
#2 Discover your employer’s policies on reimbursement
Categories to ask about include:
- Purchase of new furniture (task chair, filing cabinet, or a whiteboard)
- Hardware & Services (stand-alone second monitor, keyboard, mass storage device, upgraded WiFi router, better web camera, even an upgrade in bandwidth from your broadband carrier or extra security, such as a VPN.
- In some regions, utilities bump (for air conditioning) and perhaps heat come this winter.
- Some supplies If you have a printer, ask about toner and paper and “reasonable” supplies (like the ones you used to purloin from the supply closet).
#3 Organize & segregate your spend
It’s important to segregate your personal spend from your “work” spend. Contractors and consultants may have already set this up, but perhaps not to the extent they need to be in this new environment. W2 employees may have never tracked these things.
For all workers, this is a good tactic to increase your chance for reimbursement.
The simplest (and easiest) tactic is to open a second checking account and get a debit card attached to it for all “work” expenditures. That will make tracking and accounting super simple, and clean.
Ask your current bank if they offer a free checking/no minimum, no fee account. In case they don’t, here are 10 banks offering free checking with no minimum balance. The popular accounting platforms will help you, as will some of the larger bank online systems, which display an organized listing of your expenditures by category. Services such as Mint.com will aggregate your spending by category, as will bank platforms such as Bank of America’s Spending and Budgeting App. All of the big banks provide such a service. Ask your bank or credit union.
Another great option is to use a light-touch expense management solution, although that will take more “calories” to set up. If you have the time and patience to do so, it will be worthwhile. Some even have their own debit cards.
If your needs are simple, and the range of your business spend is narrow, a separate checking account and debit card can do the trick, with the least hassle, and lowest expense.
There’s no time like the present, to get yourself more organized, and it only takes a few calories to do so.
More in a future post, on some of the more creative (and legal), and hidden tactics to consider, if you find your “work” spend is crashing your budget.
I will also be hosting a webinar on October 13th at 11am PT to talk through these considerations and more. I hope you will choose to join me! You can register here.
In the meantime, a pause and a moment of gratitude is in order, that you are working, and healthy and safe. So many others are not as fortunate.